Experts link stock market slowdown to new T+1 settlement cycle

Experts have linked the market slowdown in the first week of June to the newly-launched T+1 settlement cycle.

The NGX’s transition to a T+1 settlement cycle for equities coincided with a sharp decline in trading volumes and a selloff in stock prices, with market experts saying foreign investors are staying on the sidelines to assess the impact of the new framework.

The experts spoke on Drinks and Mics, a podcast hosted by Nairametrics Founder and Chief Analyst, Ugo Obi-Chukwu, where market analysts reviewed the new settlement rule that took effect on June 1, 2026.

The launch of the T+1 settlement cycle means securities transactions now settle one business day after the trade date, marking Nigeria’s transition from the previous two-day settlement framework and aligning the local market with some of the world’s more advanced capital markets.

What they are saying

Chief Investment Officer at Zrosk Investment Management Ltd, Samson Esemuede, explained that settlement refers to the point at which cash leaves an investor’s account and securities are credited into the investor’s custody account.

He noted that Nigeria operated a T+3 settlement framework before November 2025, when it moved to T+2 and then further compressing the cycle to T+1.

• “For retail investors, that shouldn’t really be a problem because you get instant settlement. For local investors, you need to improve on your treasury and ensure that you have cash available, but you are largely funding Naira. So you are not as affected.” 
• “The FX market in Nigeria usually settles T+2, T+1, not T+0. So what is happening with T+1 is that you’ve compressed the settlement cycle… you have to have the cash available the next day.”  
• “People who trade Nigeria from New York, London, Hong Kong… there’s no overlap between the Nigerian market and the Hong Kong market. So you do an overnight transaction, the guys are not even there.” 

Esemuede said the bigger challenge is with foreign investors, whose trade flows involve global custodians, local custodians, brokers, and the Central Securities Clearing System, alongside a separate foreign exchange leg.

He explained that to comply with the faster settlement cycle, foreign funds may need to pre-fund Naira, which creates additional complications because the currency itself is seen as a risk asset.

More insights

Esemuede added that risk managers would typically require hedging before allowing foreign funds to pre-fund Naira positions, but Nigeria’s foreign exchange market is still evolving and does not yet provide enough hedging instruments to eliminate currency risk efficiently.

He also noted that hedging costs remain expensive, making the new settlement cycle more complex for foreign institutional investors who have to manage both securities settlement and FX exposure.

• “Risk managers would require hedging, but this FX market in Nigeria is still evolving, and we don’t have the sort of hedging instruments to allow you pre-fund your Naira without taking FX risk,” he said.
• “And hedging is also quite expensive.”  

Chief Commercial Officer and Head of Partnerships at Alerzo, Dele Akintola, also linked the weak start in June to the new settlement rule.

He noted that the Nigerian Exchange ended May with a 3.35% gain and was up more than 60% year-to-date, but the market started June on a weaker note.

Akintola said feedback from brokers involved in international business suggests that foreign investor activity has reduced sharply since the implementation of T+1 settlement.

He said the natural response from some foreign desks is to pause trading activity until they understand how the new settlement cycle affects their processes.

• “It’s coincided with the introduction of the settlement of T+1,” Akintola said.
• “I’ve spoken to a few brokers who do international business. And they’ve basically told me that their business on the international side has halved. From a turnover perspective, their business on a daily basis has halved.”  
• “We need to see how that affects our settlement cycle… So the natural thing would be to pause or sit on the sidelines. See how the policy plays out in the one or two weeks and then you decide.” 

Managing Director and CEO, Asset Management at Renaissance Capital Africa, Arnold Dublin-Green, said market data appears to support the view that trading activity has slowed since the new framework took effect.

He said equity volumes dropped 38% day-on-day between Thursday and Friday of the previous week, adding that trading activity this week will help determine whether the decline is linked mainly to T+1 or other market factors.

What this means

The T+1 settlement framework is designed to give investors faster access to cash, improve liquidity, and reduce the waiting period between trade execution and final settlement.

However, the early market reaction suggests that while the reform may benefit retail and local investors, it could temporarily disrupt foreign institutional workflows due to funding, time zone, custody, and FX settlement challenges.

The Securities and Exchange Commission rolled out T+1 after Nigeria moved from T+5 to T+3 and then T+2. The transition is in line with the Capital Market Master Plan 1.0.

What you should know

On June 1, 2026, the Central Securities Clearing System Plc launched Nigeria’s T+1 settlement cycle, completing the country’s transition from a two-day settlement framework.

The milestone was announced at a market-wide ceremony attended by the Securities and Exchange Commission, Nigerian Exchange Group, market operators, custodians, registrars, stockbrokers, and institutional investors.

Under the new framework, securities transactions executed on a trading day will now settle on the next business day. This reduces the waiting period between trade execution and final settlement.

The reform aligns Nigeria’s capital market with some of the world’s more advanced financial markets.

It also forms part of broader efforts to improve market efficiency and deepen investor confidence.

The coming weeks will be important in determining whether foreign participation rebounds after the initial adjustment period or whether the market will need further operational support to ease the transition.